MTN Nigeria Earnings Rise On Healthy Business Performance

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MTN Nigeria Communications Plc sees double-digit earnings jump in the first quarter of 2022, according to its regulatory filing. At the annual general meeting, the board of directors approved the payment of an N174.50 billion dividend to shareholders following an earnings beat. 

Key metrics show that mobile subscribers declined by 1.3 million to 70.2 million years on year, impacted by the regulatory restrictions on new SIM sales and activations. 

However, the company said it added 1.7 million subscribers in Q1 2022.  In a statement, MTN Nigeria said active data users increased by 3.4 million to 35.9 million years on year, adding 1.6 million active users in Q1 2022.

Similarly, active fintech subscribers rose from 6.2 million to 10.7 million, after it added 1.3 million subscribers in Q1 2022.

The telecom company revealed that its service revenue increased by 22.0% to N469.8 billion while earnings before interest, tax, depreciation, and amortization (EBITDA) grew by 25.7% to N257.1 billion.

This lifted the EBITDA margin up by 1.5 percentage points to 54.6% on the back of a meteoric rise in profit after tax (PAT) that inched up by 31.3% to N96.8 billion.

Earnings per share (EPS) rose by 31.3% to N4.76 kobo as the company spent heavily on capital expenditure (Capex), up 80.8% to N162.5 billion. The Telcos board of directors proposed a final dividend of N8.57 kobo per share for FY 2021.

Commenting, MTN Nigeria CEO, Karl Toriola said, “We have continued to make good progress in the first quarter, building on the momentum we achieved in Q4 2021 and delivering several key milestones as we grow our connectivity business and platforms.

“This was achieved against a backdrop of significant geopolitical volatility exacerbated by the war in Ukraine. This conflict has significantly impacted energy prices, broader inflation, supply chains and consumer spending.

“Nevertheless, I am pleased that we have made significant strides in deepening our relationships with all our stakeholders while substantially enhancing our contributions to government revenue.

“In recognition of our remarkable performance in remittance of taxes despite the challenges posed by the pandemic, the Federal Inland Revenue Services (FIRS) recognized MTN Nigeria as a top 20 taxpayer and one of the best tax compliant organizations in Nigeria for the 2021 tax year.

“In terms of strategic milestones, we concluded the first phase of a series of transactions to increase Nigerian ownership in MTN Nigeria, and we are delighted to have welcomed 126,720 retail investors to our shareholder base, many of whom are first-time investors.

“This includes Nigerian pension funds representing approximately 6.5 million Nigerian contributors. As of 31 March 2022, the number of retail shareholders had increased to approximately 139,000, demonstrating the advances in MTN’s localization imperative. We also completed a group-wide brand refresh to position the business appropriately as we accelerate our growth and scale our platforms through our Ambition 2025 strategy.

“In addition, we have fully paid for one lot of 100MHz in the 3.5GHz spectrum band and have been assigned the 3500 – 3600 MHz frequencies for 10 years. We will launch our 5G services once regulatory approval is obtained.

“Post the reporting period, we were granted final approval for our MoMo Payment Service Bank (PSB) by the Central Bank of Nigeria (CBN). This will enable us to offer financial services in line with the CBN’s guidelines and support the government in fulfilling its agenda of driving financial inclusion in Nigeria”.

MTN Nigeria CEO added that although the group mobile subscriber base declined by 1.9% year on year from 71.5 million in March 2021 to 70.2 million, MTN Nigeria sustained the growth trajectory from Q4 2021 as the Telcos ramp up capacity for SIM registration and NIN enrolment.

“We added 1.7 million subscribers in Q1 2022. In addition, active data subscribers rose by 10.5% year on year to 35.9 million, with 1.6 million added in Q1 as we continued to drive data conversion from our new and existing subscriber base”.

To enable the growth in subscribers and traffic, the management said they continued to enhance the capacity of the MTN Nigeria network.

In doing so, MTN Nigeria Chief said the company frontloaded capital expenditure (CAPEX) plan for the year, deploying CAPEX of N162.5 billion in the period to accommodate the sustained demand for data and accelerate the rollout of our 4G network, which now covers approximately 72% of the population and accounts for 76% of data traffic.

“Our existing MoMo business provides a solid foundation for launching MoMo PSB and driving digital and financial inclusion in Nigeria.

“As at the end of March 2022, we had approximately 10.7 million active users and 166k active MoMo agents. Our financial performance in the quarter was underpinned by strong commercial momentum, driving growth across our key revenue lines”.

He said MTN Nigeria’s service revenue grew by 22%, in line with the company’s medium-term growth guidance of at least 20%’.

This was led by growth in data and supported by voice, fintech and digital services.

“Our ability to drive service revenue growth while managing expenses resulted in an acceleration in EBITDA growth to 25.7% and EBITDA margin expansion of 1.5pp to 54.6% year on year”.

Toriola explained that this underpinned profit before tax (PBT) and PAT growth of 39.4% and 31.3%, respectively. At the Annual General Meeting held on 28 April 2022, the shareholders approved a final dividend of N174.5 billion, representing N8.57 kobo per share for FY 2021.

On the regulatory front, on 4 April 2022, the Nigerian Communications Commission (NCC) announced its decision not to extend the deadline for NIN-SIM linkage further, requiring all operators to restrict outgoing calls for subscribers whose SIMs were not associated with National Identity Numbers (NINs).

“We have complied with this directive and continue to support the Government’s efforts in their NIN enrolment process. As of 25 April 2022, approximately 60 million subscribers have submitted their NINs, representing about 85% of our subscriber base”.

Similarly, the MTN Nigeria Foundation continued its initiatives in Q1, reaching more than 10,000 people in over 90 communities in five states through medical outreach.

The Foundation also awarded scholarships worth N74 million to 370 scholars, bringing the total value of granted scholarships to approximately N3 billion, benefitting about 5,000 young Nigerians.

MTN Nigeria said it will continue executing our strategy to deliver service revenue growth in line with medium-term guidance.

“We continue to focus on driving operating leverage and extracting efficiencies to support earnings, cash flow growth and returns over the medium term”.

Solid commercial momentum underpinning service revenue growth MTN Nigeria recorded a solid Q1 2022 performance, tracking positively against our medium-term targets with 22.0% growth in service revenue and the expansion of EBITDA margins.

This was delivered through solid commercial momentum and the ongoing execution of our Ambition 2025 strategy despite challenging trading conditions.

Voice revenue grew by 5.8% as the group recorded increased gross connections and higher usage from our active SIM base.

This was enabled by expanded customer acquisition touchpoints and rural telephony initiatives, as well as enhanced customer value management (CVM) toolkit, which reduced the impact of the SIM registration and activation restrictions.

The company said data revenue rose by 54.0%, maintaining the accelerated growth trajectory through growth in subscriber base and data usage.

This was sustained by an aggressive 4G network expansion and enhanced quality and capacity of our network to support rising data traffic.

Data traffic rose by 84.8% and usage (MB per user) by 69.8%.

“We added about a million new smartphones to our network in Q1, bringing smartphone penetration to 50.0%. As a result, our 4G network now covers 71.7% of the population, up from 70.3% in December 2021. We continue to drive home broadband penetration, reaching over 775k users, up by over 160k in Q1”.

It was noted that Fintech revenue rose by 46.5% on the back of the growing adoption of our fintech services and expanded user base.

MTN Nigeria said it continues to expand its MoMo agent network with more than 800k registered agents and over 166k active agents (agents who perform a minimum of ten revenue-generating transactions within 30 days).

“Having established a significant foundation of registered agent network, we are now focusing on scaling the active base. We have expanded our agent services to include card withdrawal services by deploying point of sales (POS) terminals to the agent network”.

This has contributed to the growing total volume of transactions to over 56.1 million, up 132.7% year on year, by more than 10.7 million active users (up 135.2%).

Digital revenue grew by 35.3% as penetration of our digital products continues to deepen, driven by increased usage from our active base.

“We have reached 7.4 million digital subscriptions (up 164.1% YoY), with ayoba accounting for 45% of the subscriptions and Rich Media accounting for 55%”.

The company said revenue from digital services was driven by Rich Media, Mobile Advertising and Content VAS.

“We are transforming our Y’ello Digital Platforms into a one-stop destination that caters to all consumer segments”.

Revenue from the enterprise business rose by 34.3%, underpinned by the onboarding of new customers across segments and the uptake of enhanced services.

“Our enterprise business is transitioning from product to platform while leveraging core mobile and fixed connectivity to serve customers across all segments better.

“We have commenced executing programs to digitize and transform micro, small and medium enterprises (MSMEs) in Nigeria”.

Key among these is developing a cloud technology marketplace to empower, educate and enrich MSMEs.

“Our goal is to drive further adoption of enterprise platforms (internet of things and cloud), creating additional value for our customers and enabling them to innovate while remaining profitable”.

Looking ahead, MTN Nigeria said the company is focused on building on the solid foundation of growth we have laid thus far.

“We will continue to ramp up gross connections through our rural connectivity drive and leverage CVM initiatives to grow our subscriber base and usage further.

“To support further growth in our connectivity business, we will continue to accelerate the expansion of our 4G network towards achieving our goal of 80% coverage by year-end while providing home broadband to capture a significant share of market growth”.

Following the 5G spectrum acquisition, MTN Nigeria said it will commence the initial rollout of 5G services in the six geopolitical zones once we receive regulatory clearance.

“This will enable us to deepen broadband penetration in Nigeria, enhance customer experience and unlock new revenue streams from the numerous use cases 5G offers.

“Having obtained the final approval for our MoMo PSB, which we expect to launch the business in Q2, we will leverage our agent network to accelerate the rollout of advanced services in our mission to drive digital and financial inclusion.

“We remain committed to driving cost management across the business through our expense efficiency program and strengthening our operations and financial position to improve returns to shareholders.

“In the near term, our margins will be impacted by the NCC’s directive on NINSIM linkage, higher energy-related costs as well as the investment to launch and rollout PSB.

“We, therefore, anticipate that EBITDA margins for the full year will be slightly below our medium-term target range of 53% -55%, on current operating and economic assumptions.

“We have put in place interventions to moderate the impact of the NIN-SIM linkage regulation on both revenue and the subscriber base”.

This still has a dependency on NIMC validation capacity. While limited incremental costs will be incurred to support NIMC’s NIN enrolment capacity, the management expects a muted impact on the 2022 outlook for the top line.

“We anticipate an increase in churn across the sector in Q3 as the industry potentially loses affected subscribers who may stop activity after initial restriction. We believe that mitigating actions will recover the base in line with our broad expectations for FY 2022.

“While the impact on short-term service revenue growth remains uncertain at this stage, we maintain our medium-term service revenue growth guidance of “at least 20%”. CULLED.

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